Annual report pursuant to Section 13 and 15(d)

Cash and Investments

v2.4.0.8
Cash and Investments
12 Months Ended
Dec. 28, 2013
Cash and Investments [Abstract]  
Cash And Investments [Text Block]
Note 5: Cash and Investments
Cash and investments at the end of each period were as follows:
(In Millions)
 
Dec 28,
2013
 
Dec 29,
2012
Available-for-sale investments
 
$
18,086

 
$
14,001

Cash
 
854

 
593

Equity method investments
 
1,038

 
992

Loans receivable
 
1,072

 
979

Non-marketable cost method investments
 
1,270

 
1,202

Reverse repurchase agreements
 
800

 
2,850

Trading assets
 
8,441

 
5,685

Total cash and investments
 
$
31,561

 
$
26,302


In the third quarter of 2013, we sold our shares in Clearwire Corporation, which had been accounted for as available-for-sale marketable equity securities, and our interest in Clearwire Communications, LLC (Clearwire LLC), which had been accounted for as an equity method investment. In total, we received proceeds of $470 million on these transactions and recognized a gain of $439 million, which is included in gains (losses) on equity investments, net on the consolidated statements of income. Proceeds received and gains recognized for each investment are included in the "Available-for-Sale Investments" and "Equity Method Investments" sections that follow.
Available-for-Sale Investments
Available-for-sale investments at the end of each period were as follows:
 
 
December 28, 2013
 
December 29, 2012
(In Millions)
 
Adjusted
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
Adjusted
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Asset-backed securities
 
$
11

 
$

 
$
(2
)
 
$
9

 
$
14

 
$

 
$
(3
)
 
$
11

Bank deposits
 
2,951

 
6

 
(1
)
 
2,956

 
1,417

 
1

 

 
1,418

Commercial paper
 
4,464

 

 

 
4,464

 
4,184

 
1

 

 
4,185

Corporate bonds
 
2,359

 
15

 
(3
)
 
2,371

 
635

 
8

 
(1
)
 
642

Government bonds
 
1,024

 

 

 
1,024

 
2,235

 

 

 
2,235

Marketable equity securities
 
3,340

 
2,881

 

 
6,221

 
3,356

 
1,069

 
(1
)
 
4,424

Money market fund deposits
 
1,042

 

 
(1
)
 
1,041

 
1,086

 

 

 
1,086

Total available-for-sale investments
 
$
15,191

 
$
2,902

 
$
(7
)
 
$
18,086

 
$
12,927

 
$
1,079

 
$
(5
)
 
$
14,001


In the preceding table, government bonds include bonds issued or deemed to be guaranteed by government entities. Government bonds include instruments such as non-U.S. government bonds, U.S. agency securities, and U.S. Treasury securities. Bank deposits were primarily held by institutions outside the U.S. as of December 28, 2013, and December 29, 2012.
During the third quarter of 2012, we purchased ASML Holding N.V. equity securities totaling $3.2 billion. This equity interest has been accounted for as an available-for-sale investment and is included as marketable equity securities in the preceding table.
For information on the unrealized holding gains (losses) on available-for-sale investments reclassified out of accumulated other comprehensive income into the consolidated statements of income, see "Note 25: Other Comprehensive Income (Loss)."
We sold available-for-sale investments for proceeds of $934 million in 2013 ($2.3 billion in 2012 and $9.1 billion in 2011). Proceeds received in 2013 included $142 million from the sale of our shares in Clearwire Corporation, which are included in sales of available-for-sale investments within investing activities on the consolidated statements of cash flows. Substantially all of the proceeds in 2011 were from debt investments primarily used to fund our acquisition of McAfee. The gross realized gains on sales of available-for-sale investments were $146 million in 2013 ($166 million in 2012 and $268 million in 2011). In 2013, we recognized a gain of $111 million on the sale of our shares in Clearwire Corporation, previously included as marketable equity securities in the preceding table. We determine the cost of an investment sold on an average cost basis at the individual security level. Impairment charges recognized on available-for-sale investments were $14 million in 2013 ($36 million in 2012 and $73 million in 2011).
The amortized cost and fair value of available-for-sale debt investments, by contractual maturity, as of December 28, 2013, were as follows:
(In Millions)
 
Cost     
 
Fair Value
Due in 1 year or less
 
$
9,170

 
$
9,188

Due in 1–2 years
 
979

 
978

Due in 2–5 years
 
421

 
421

Instruments not due at a single maturity date
 
1,281

 
1,278

Total
 
$
11,851

 
$
11,865


Instruments not due at a single maturity date in the preceding table include all asset-backed securities, most callable government bonds, and all money market fund deposits.
Equity Method Investments
Equity method investments, classified within other long-term assets, at the end of each period were as follows:
  
 
December 28, 2013
 
December 29, 2012
(Dollars In Millions)
 
Carrying
Value
 
Ownership
Percentage
 
Carrying
Value
 
Ownership
Percentage
IM Flash Technologies, LLC
 
$
646

 
49
%
 
$
642

 
49
%
Intel-GE Care Innovations, LLC
 
117

 
50
%
 
146

 
50
%
Clearwire Communications, LLC
 

 
%
 

 
6
%
Other equity method investments
 
275

 
 
 
204

 
 
Total
 
$
1,038

 
 
 
$
992

 
 

IM Flash Technologies, LLC and IM Flash Singapore, LLP
Micron Technology, Inc. (Micron) and Intel formed IM Flash Technologies, LLC (IMFT) in 2006 and IM Flash Singapore, LLP (IMFS) in 2007 to manufacture NAND flash memory products for Micron and Intel. During the second quarter of 2012, we entered into agreements with Micron that modified our joint venture relationship including an agreement to sell our ownership interest in IMFS. We received $605 million in the second quarter of 2012 from the sale of assets of IMFS and certain assets of IMFT to Micron.
As part of the agreements to modify our joint venture relationship, we also entered into an amended operating agreement for IMFT. This amended operating agreement extends the term of IMFT to 2024, unless earlier terminated under certain terms and conditions, and provides that IMFT may manufacture certain emerging memory technologies in addition to NAND flash memory. These agreements include a supply agreement for Micron to supply us with NAND flash memory products. We provided approximately $365 million to Micron in the second quarter of 2012, primarily for subsequent product purchases under the supply agreement with Micron. The agreements also extend and expand our NAND joint development program with Micron to include emerging memory technologies. Additionally, the amended agreement provides for certain rights that, beginning in 2015, will enable us to sell to Micron, or enable Micron to purchase from us, our interest in IMFT. If Intel exercises this right, Micron would set the closing date of the transaction within two years following such election and could elect to receive financing from Intel for one to two years.
IMFT is a variable interest entity. All costs of the IMFT joint venture will be passed on to Micron and Intel pursuant to our purchase agreements. Intel's portion of IMFT costs, primarily related to product purchases and production-related services, was approximately $380 million in 2013 (approximately $705 million in 2012 and approximately $985 million in 2011 for IMFT and IMFS). Subsequent to the sale of our ownership interest in IMFS in the second quarter of 2012, we no longer incur costs related to IMFS. The amount due to IMFT for product purchases and services provided was approximately $75 million as of December 28, 2013 (approximately $90 million as of December 29, 2012). IMFT returned $45 million to Intel in 2013, which is reflected as a return of equity method investment within investing activities on the consolidated statements of cash flows ($137 million in 2012 and $263 million in 2011).
IMFT depends on Micron and Intel for any additional cash needs. Our known maximum exposure to loss approximated the carrying value of our investment balance in IMFT, which was $646 million as of December 28, 2013. Except for the amount due to IMFT for product purchases and services, we did not have any additional liabilities recognized on our consolidated balance sheets in connection with our interests in this joint venture as of December 28, 2013. In addition, our potential future losses could be higher than the carrying amount of our investment, as Intel and Micron are liable for other future operating costs or obligations of IMFT. Future cash calls could also increase our investment balance and the related exposure to loss. In addition, because we are currently committed to purchasing 49% of IMFT’s production output and production-related services, we may be required to purchase products at a cost in excess of realizable value.
We have determined that we do not have the characteristics of a consolidating investor in the variable interest entity and, therefore, we account for our interest in IMFT (and accounted for our prior interest in IMFS) using the equity method of accounting.
Intel-GE Care Innovations, LLC
In the first quarter of 2011, Intel and General Electric Company (GE) formed Intel-GE Care Innovations, LLC (Care Innovations), an equally owned joint venture in the healthcare industry, that focuses on independent living and delivery of health-related services by means of telecommunications. The company was formed by combining assets of GE Healthcare’s Home Health division and Intel’s Digital Health Group. As a result of forming Care Innovations, we recognized a gain of $164 million in the first quarter of 2011, which is included in interest and other, net on the consolidated statements of income.
Care Innovations is a variable interest entity and depends on Intel and GE for any additional cash needs. Our known maximum exposure to loss approximated the carrying value of our investment balance in Care Innovations, which was $117 million as of December 28, 2013.
Intel and GE equally share the power to direct all of Care Innovations' activities that most significantly impact its economic performance. We have determined that we do not have the characteristics of a consolidating investor in the variable interest entity and, therefore, we account for our interest in Care Innovations using the equity method of accounting.
Clearwire Communications, LLC
In 2008, we invested in Clearwire LLC. We recognized our proportionate share of losses to the extent that our investment had a positive carrying value. We recognized equity method losses of $145 million in 2011. In the third quarter of 2013, we sold our interest in Clearwire LLC for proceeds of $328 million, which is included in other investing within investing activities on the consolidated statements of cash flows. We recognized a gain on the sale of our interest in Clearwire LLC of $328 million.
Non-marketable cost method investments
The carrying value of our non-marketable cost method investments was $1.3 billion as of December 28, 2013 ($1.2 billion as of December 29, 2012). In 2013, we recognized impairment charges of $103 million on non-marketable cost method investments, which is included within gains (losses) on equity investments, net on the consolidated statements of income ($104 million in 2012 and $56 million in 2011).
Trading Assets
As of December 28, 2013, and December 29, 2012, all of our trading assets were marketable debt instruments. Net losses related to trading assets still held at the reporting date were $70 million in 2013 (net gains of $16 million in 2012 and net losses of $71 million in 2011). Net gains on the related derivatives were $86 million in 2013 (net gains of $11 million in 2012 and $58 million in 2011).